The shekel is weakening against the dollar and firm against the euro today. In morning inter-bank trading, the shekel-dollar exchange rate was down 0.52% from yesterday's representative rate at NIS 3.4957/$, and up 0.08% against the euro at 4.1309/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.143% from Tuesday at NIS 3.514/$ and set the shekel-euro rate down 0.019% at 4.128/€.
This afternoon, the Bank of Israel Monetary Committee will announce its interest rate decision for November. It will be a major surprise, if the rate is raised above 0.1%, a historic low, which was set and has been unchanged since March 2015.
In July, the Bank of Israel's economists projected that the key interest rate would remain unchanged through the first quarter of 2018, rise to 0.25% in the second quarter and rise again in the fourth quarter to 0.5%.
However, the key to such a rate hike is inflation. Israel has had negative inflation for the past three and a half years and the Bank of Israel is unlikely to raise the interest rate if inflation does not move toward the government's target range of 1%-3%.
Earlier this week, the Central Bureau of Statistics announced that the Consumer Price Index (CPI) had unexpectedly risen by 0.1% in September. Analysts had predicted a negative CPI reading for September. Even though inflation is running at only 0.1% over the past 12 months, September's reading and the 0.2% rise in August is offering encouragement that the negative inflation that has characterized the Israeli economy for nearly four years is about to end.
The shekel remained strong last week despite traders reporting that the Bank of Israel had purchased foreign currency in attempts to weaken the Israeli currency.
Published by Globes [online], Israel business news - www.globes-online.com - on October 19, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017